UPDATE : This just in from a co-conspirator:
I’ve been perusing the great work of fiction that is
Gordy’soops, the Chancellor’s growth forecasts, and on page 1 of Annex A: The Economy we have this bullet-pointed gem:
‘UK GDP growth of 3/4 % for 2008 with the economy contracting in the second half of the year’
Now, when the chancellor stood up at the dispatch box, three quarters of 2008 GDP growth were known:
Q1 0.3%In order to hit the forecast 0.75%, the economy has to grow at feisty 1% in the fourth quarter. Has the Chancellor been outside recently?
UPDATE II :Some querying via email of how the GDP quarterly statistics are precisely computed by someone who seems to know what they are talking about; “There are lies, damned lies and statistics”.
It is not all bad news though, Guido is short the FTSE….
Keen readers will notice the change to the portfolio on the right hand side for the first time in a month. Guido has just shorted FTSE futures and Dow futures. Combination of bad local news and a sense that there is a mood of bailout fatigue in the U.S. There is usually a “Santa Claus rally” in the markets at year end. Not sure Santa is going to come this year…
Hyperbole? The government bond markets will enslave the citizens and subjects who pay the taxes that service their demands as surely as feudal barons demanded their lands were ploughed for their table by serfs. It is stunning that Brown’s policies have cost HM Treasury, in real terms, more than it took to defeat the Luftwaffe and the Wehrmacht. The debt obligations of the state will be £2 trillion within a few years, Gordon ignores the unfunded pensions of his bloated public sector bureaucracy and admits to “only” £1 trillion. The long term consequences of a debt burden as great as this are that Britain will have a permanently low growth economy. If, as is most likely, predominantly foreign investors hold government bonds, higher taxes will reduce the available capital which can be put to productive use in the domestic economy because the interest paid is exported. That is if they are not too worried about Britain going bust to invest at all. The chart above (click to enlarge) shows the cost of insuring in the credit default swap market against the U.K. government going bust is nearly triple the German rate. British Gilts are becoming the junk bonds of the G7.
Do people want to live in a country designed by Gordon Brown, as cheered on this morning by Polly Toynbee, Will Hutton and Roy Hattersley? Is there a prospect on the horizon of a radical government which can arrest the inevitable decline? Is there a Thatcher-like political leader who can turn around the super-taxer-tanker of state? Guido suspects a lot of internationally mobile people will be weighing up the prospects and possibly heading for the exits soon.
UPDATE : From The Times this morning; “In recent years, thousands of educated Australians have come to the UK. Immigration has been the start of a career, not a gap year, it adds. So there should be some alarm at the fact that they are heading back home in ever larger numbers: 2,700 a month compared to 1,750 a month in 2005. This is largely a vote of no confidence in the old country.”
Australia runs a budget surplus, has paid down the national debt in the good years and welcomes skilled migrants. Form an orderly queue.
Elsewhere fund managers are seeking a quick resolution of Lehmans bankruptcy issues, billions remain frozen in accounts resulting in margin calls on fund managers unable to retrieve securities from the Lehmans administrator – making them forced sellers and an extra downward pressure on London’s markets. The FSA or the Bank of England needs to untangle this mess urgently. Unfortunately it is unclear who has responsibility under Gordon’s regulatory regime.
City law firms are dusting off old legal tomes from the seventies on sovereign defaults – when countries go into bankruptcy – Iceland is on the edge. What will surprise many is that Italy is the second candidate for bankruptcy. How will the Euro survive a member country’s financial collapse? Italy has cooked the books since before even joining the euro. Bond markets know it, the wide spread between Italian government bonds and German government bonds shows that many believe that European unity will not include the Bundesbank standing behind Italian Buoni del. Tesoro Pluriennali. If Italy fails what happens to the European project?
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John McTernan told Channel 4 News…
“You can’t make an omelette without breaking a few eggs, you don’t win in politics without breaking legs.”
What time will dinner be ready this evening?
Rob Wilson MP
In the interests of me I am placing a copy of this email in the public domain.